Target, Limited Beat Projections

ANNE D'INNOCENZIO

Published 6:00 pm, Wednesday, February 27, 2002

AP Business Writer

Three major U.S. retailers _ Target Corp., The Limited Inc. and Tiffany & Co. _ reported fourth-quarter earnings Thursday that beat Wall Street's modest expectations. But shares fell at all three companies as executives warned of challenging times ahead.

Target Corp.'s fourth-quarter profits rose nearly 20 percent, though only its namesake discount store division increased sales in the period. Limited, helped by lean inventories across all brands and robust sales at Victoria's Secret, a division of its majority held Intimate Brands Inc., saw profits up 35 percent.

Tiffany's, struggling with sales declines in the U.S. and certain overseas markets, saw profits slip 2.3 percent. It also forecast that first-quarter results would be at the low end of Wall Street projections.

"The recession may be in the process of bottoming out, but that does not mean that the consumer spending recovery is going to burst open," said Kurt Barnard, president of Barnard's Retail Trend Report, based in Upper Montclair, N.J. "Consumer confidence has weakened. Job security continues to be a major concern, as the unemployment rate continues fairly high."

Target Corp.

Minneapolis-based Target, which operates Target discount stores as well as Mervyn's and Marshall Fields, earned $658 million, or 72 cents per share, for the three months ended Feb. 2. That compares with a $552 million, or 61 cents a share, in the year-ago period.

The results included a one-time, after-tax charge of $5 million for debt repurchase. Without the charge, the company earned 73 cents a share.

Sales rose nearly 7 percent to $13 billion from $12.2 billion a year ago. Because of differences in the respective fiscal calendars, Target had 13 weeks of sales in the most recent period versus 14 a year ago.

Adjusted for that difference, sales in the company's chain of 1,053 Target discount sales were up 10.5 percent to $10.9 billion. Sales at its 264 Mervyn's fell 3.5 percent and at its 64 Marshall Field's stores dropped 8.3 percent.

Sales at stores open at least a year, known as same-store sales, rose 6.2 percent at Target, held steady at Mervyn's and fell 5.6 percent at Marshall Field's.

Executives said the company's alliance with Amazon.com was proceeding as planned and will result in the relaunch of the Web site for Target this summer.

For the year, Target earned $1.37 billion, or $1.50 per share, up from $1.26 billion, or $1.38 a share, in the year ago quarter.

Sales for the year were $39.18 billion versus $36.4 billion in 2000.

Scovanner expressed uncertainty over the economy, but told investors that sales for the first few weeks of February beat company's expectations. If recent sales strength continues, Target could exceed its 2002 profit forecasts of $1.75 per share.

"I think chances of exceeding that are at least 50 percent, and therefore, chances of falling short of it are less than 50 percent," he said.

In trading on the New York Stock Exchange, Target shares fell 4.6 percent, or $2 a share, to $41.90.

The Limited Inc.

The Columbus, Ohio-based retailer, which operates stores under its namesake, Express, Lerner New York, Structure, and Henri Bendel, said it earned $326.5 million, or 75 cents per share, for the quarter ended Feb. 2. That compared with $238.1 million, or 54 cents per share, a year ago.

The year-ago figures included results from Lane Bryant, which was sold to Charming Shoppes Inc. in August, and a charge of $9.9 million, or a penny per share, to shut down Bath & Body Works' nine stores in the United Kingdom.

Sales for the quarter fell to $3.13 billion from $3.52 billion a year ago, but were up 1 percent when excluding sales from the extra week in the fourth quarter of 2000. Same-store sales decreased 2 percent.

For the full year, Limited earned $518.9 million, or $1.19 per share, up from $427.9 million, or 96 cents per share, a year ago. Sales were $9.36 billion, down from $10.1 billion.

The company said it expects the economic and retail environment to continue to be tough in the first half of 2002, and said that it will "manage inventories, expenses and capital spending conservatively."

Earnings per share should be unchanged in the first quarter of 2002 compared with 2001. The company is looking for earnings per share to rise in the low to mid-single digit percentage range for the year.

The Limited, which spun off 16 percent of Intimate Brands in 1995, announced Feb. 4 that it has offered to reacquire the shares it does not own by exchanging them for Limited shares. Intimate Brands has said it has appointed a committee from its board of directors to evaluate the offer.

In trading on the NYSE, Limited shares fell 28 cents to $18.01 a share.

Tiffany & Co.

The New York-based upscale jewelry retailer posted earnings of $82.74 million, or 55 cents per share, for the three months ended Jan. 31. That compares with $84.67 million, or 56 cents per share, a year earlier.

The results included a pretax impairment charge of $7.8 million related to its investment in a third-party Internet retailer.

Excluding the charge, it would have earned 58 cents per share. Analysts polled by Thomson Financial/First Call expected earnings of 56 cents per share.

Quarterly sales slipped 2 percent to $565.7 million from $576.4 million in the year-ago period.

For the year, Tiffany posted net earnings of $173.6 million, or $1.15 per share, compared with $190.6 million, or $1.26 per share, a year ago. Sales were $1.6 billion, down from $1.66 billion a year ago.

Looking ahead, Tiffany said it expects minimal growth in worldwide net sales in the first half, which would result in operating earnings modestly lower than the prior year. The company then expects net sales and operating earnings to grow by percentages in the teens in the second half.

For the first quarter, the company projects first-quarter earnings to be in the range of 16 cents to 17 cents per share Analysts estimated profits of between 16 cents to 20 cents per share.

For the full year, earnings per share should be in the range of $1.20 to $1.27. Analysts expect earnings to be about $1.25 per share.

In trading on the NYSE, Tiffany shares fell 6 percent, or $2.22 a share, to $32.81.